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Editorial: Wells Fargo blocks the courthouse door

Wells Fargo scammed 2 million account holders but now wants to bloack ’s news CEO, Timothy Sloan, met with the Des Moines Register’s Editorial Board a few weeks ago, he said the bank intends to do everything it can to win back the trust of consumers

When Wells Fargo’s news CEO, Timothy Sloan, met with The Des Moines Register’s Editorial Board a few weeks ago, he said the bank intends to do everything it can to win back the trust of its customers.

Sloan's company is reeling in the wake of public revelations that it opened 2 million credit card and deposit accounts in customers’ names without the customers’ approval. Wells Fargo found 12,630 accounts in Iowa that potentially could have been unauthorized, including 740 that incurred fees, according to a company spokesman.

The scandal has so far cost the bank $190 million in penalties and compensation.

Unfortunately, Sloan made clear in his discussion with the Register that one thing the bank won’t consider in its efforts to "make it right" is waiving the contractual requirement that forces customers to take any and all grievances to private arbitration rather than to court.

In a written statement to Congress, the bank said has said it intends to hold customers to the arbitration requirement that demands customers give up their right to sue, regardless of the nature of their complaint or the damages they may have sustained.

At the same time, Wells Fargo is running television commercials detailing its efforts to “make things right” for customers. Against a stirring backdrop of a horse-driven stagecoach moving in slow motion across a grassy field, the company says: “We’re taking action. We’re renewing our commitment to you.”

So why is Wells Fargo insisting on arbitration? Sloan didn't answer that question directly when he spoke to the Register, and the company has also deflected the question, partly by characterizing arbitration as one step in a process that also includes mediation offered at no cost to the customer. Still, that process is predicated on customers relinquishing their right to sue.

That's a questionable way for any business to act, but it’s particularly irksome to see Wells Fargo violate its customers’ trust and then block those same customers’ access to the courthouse by arguing that lawsuits would violate the terms of their agreements with the bank.

As the New York Times reported last year, the practice of requiring arbitration to obtain banking and other financial services has become routine since 2011 when the U.S. Supreme Court validated the practice.

The problem is that arbitration denies customers the legal protections normally afforded through court proceedings, such as the right to appeal. And because arbitration hearings and the evidence they produce are not open to the public, arbitration also helps to conceal widespread, corporate-level misconduct from other potential litigants, as well as from other customers and regulators.

Chances are, Wells Fargo will prevail in its efforts to force customers to pursue their complaints through arbitration. Just last year, a court dismissed a separate lawsuit against Wells Fargo on the grounds that customers had agreed to arbitration when opening their accounts.

But if Wells Fargo is sincere about atoning for its actions and doing the right thing for its customers, it will reverse course and voluntarily waive the arbitration requirement, allowing the people who were victimized by its practices to have their complaints heard in open court.

Unfortunately, the odds of that happening appear to be slim. A new bill in Congress would allow Wells Fargo customers to have their day in court, and the Consumer Financial Protection Bureau is considering rules that would prohibit financial institutions from forcing customers into arbitration. But those proposals are not expected to go anywhere in a Republican Congress and are also likely to face opposition from the newly elected president.

Wells Fargo should waive the arbitration requirement — not because it has to, or even because it makes sense from a long-term customer-relations standpoint. It should waive the requirement because it’s the right thing to do.